Nabor Industries is considering going public but is unsure of a fair offering price for the company. Before hiring an investment banker to assist in making the public​ offering, managers at Nabor have decided to make their own estimate of the​ firm's common stock value. The​ firm's CFO has gathered data for performing the valuation using the free cash flow valuation model. The​ firm's weighted average cost of capital is 11%​, and it has $3,110,000 of debt at market value and $620,000 of preferred stock in terms of market value. The estimated free cash flows over the next 5​ years, 1 through 5​, are given in the​ table, year (t) free cash flow  1 270,000 2 330,000 3 360,000 4 440,000 5 470,000 After year 5​, the firm expects its free cash flow to grow by 5% annually.   a.  Estimate the value of Nabor​ Industries' entire company by using the free cash flow valuation model. b.  Use your finding in part a​, along with the data provided​ above, to find Nabor​ Industries' common stock value. c.  If the firm plans to issue 200,000 shares of common​ stock, what is its estimated value per​ share?

Vijay

Foundation, Inc., is comparing two different capital structures: an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 145,000 shares of stock outstanding. Under Plan II, there would be 125,000 shares of stock outstanding and $716,000 in debt outstanding. The interest rate on the debt is 8 percent, and there are no taxes. Use M&M Proposition I to find the price per share of equity under each of the two proposed plans. What is the value of the firm? Input Area: Plan 1: Shares outstanding Plan II: Shares outstanding Debt outstanding Interest rate 2 ЕВIТ BEBIT 145,000 125,000 $716,000 8% $300,000 $600,000 1 5 (Use cells A6 to B13 from the given information

Reynolds Construction's current value of operations is $750 million based on the free cash flow valuation model. Its balance sheet shows $50 million of short-term investments that are unrelated to operations, and $300 million of total debt. What is the best estimate for the firm's value of equity, in millions?.

Trapper Corporation is comparing two different capital structures, an all-equity plan (Plan I) and a levered plan (Plan II). Under Plan I, the company would have 180,000 shares of stock outstanding. Under Plan II, there would be 130,000 shares of stock outstanding and $2.27 million in debt outstanding. The interest rate on the debt is 8 percent and there are no taxes. a. Use M&M Proposition I to find the price per share. (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the value of the firm under each of the two proposed plans? (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) a. Share price b. All-equity firm value Levered plan firm value

Guam Motors is presently an all equity firm. It needs to raise $2.5m in additional funds. After raising its funds, it expects perpetual EBIT to be $600,000. The firm's unlevered cost of equity is 12% and its before tax cost of debt is 8%. 1) If there are no corporate taxes, under M-M theory what is the value of Guam Motors if it employs common stock to raise the needed funds? 2)If there are no corporate taxes and Guam Motors employs debt to raise 50% of the firm value, what is the cost of equity, the weighted average cost of capital and the value of the firm? 3) If there are no corporate taxes and M-M theory holds, will investors prefer levered firm to the unlevered firm? Why? 4)Will the presence of corporate taxes increase or decrease the firm value? Why? 5)Assume that corporate tax is 25%. What is the all equity value of Guam Motors? 6)If the corporate tax is 25% and Guam Motors employees same amount of debt as in 2) to raise part of the firm value, what is the cost of equity,the…